Microsoft, Yahoo Still Search Competitors, According to Yahoo

Microsoft and Yahoo may have signed a 10-year agreement that has Bing powering search on Yahoo sites, but Yahoo still insists that its online partner remains a competitor in the U.S. search arena. As Yahoo rolled out several new features for its key products on Aug. 24, its executives suggested the company's focus is now on their Web sites' front-end experience, even with Bing taking over search-engine duties.

Despite a 10-year agreement that has Microsoft's
Bing powering search on Yahoo's
sites, Yahoo evidently still sees its online partner as a competitor. In an Aug.
24 press conference, Yahoo executives revealed several new upgrades to its key
products, while also suggesting that Yahoo will continue to duel heartily
against both Microsoft and Google to pull eyeballs to its sites.
"The agreement calls for Microsoft to supply us with
algorithmic search results, images and video," Prabhakar Raghavan,
senior vice
president of Yahoo's Labs and Search Strategy, said during the press
conference. "We will be free to innovate on top of that layer."

Raghavan suggested that Yahoo will no longer fight what he
termed "the megawatt war," with search engines chewing through billions of Web
pages in order to spit results back to the end-user, and will instead focus on
providing a front-end experience different from that offered by either Microsoft
or Google.

To that end, Yahoo plans on integrating several new features
into its user experience, including upgrades to Yahoo Search, Yahoo Messenger
and Yahoo Mail. The evident hope is that those front-end applications will
compel users to choose Yahoo over Bing or Google, whose homepages emphasize
search over applications such as email.
Besides a new three-column layout that mirrors the Yahoo
homepage, Yahoo's new search page integrates results from YouTube, Yelp and
other sites; searching for people will pull results from Facebook, LinkedIn,
Twitter, FriendFeed and other social-networking sites. Despite the Microsoft
deal, Yahoo signaled during the press conference that it fully intends to
continue devoting resources to its front-end search experience.
Yahoo's insistence that it remains competitive comes after
weeks of speculation that the Microsoft agreement would mean the end of Yahoo as
a viable search competitor. Analysts have also suggested that, despite the
combined scale of Microsoft-Yahoo search, the
companies could still have a hard time presenting a viable threat to Google's
market share.

Under the terms of the agreement, officially
inked on July 29, Microsoft Bing will power Yahoo's search engine while
Yahoo takes on worldwide sales duties for both companies' search advertisers.
The deal was widely seen as an attempt by both companies to counter the rising
dominance of Google, which holds a 65 percent share of the U.S. search-engine
market.
Combined, Bing and Yahoo will hold close to 30 percent of
that market. Microsoft has suggested that, by incorporating Yahoo's user base,
Bing will now be able to utilize more user-generated data in refining search
results. One
key part of the deal had Yahoo "owning" the user experience on its sites,
including search - an aspect the company has seized upon to suggest that it
remains competitive. Yahoo
also has a potential backdoor escape from the Microsoft deal: a contract
provision stating that, if Google's RPS (revenue-per-search) query rate is
higher than Microsoft's and Yahoo's combined RPS rates, then Yahoo can terminate
the agreement. Five years into the deal, Yahoo can terminate if Yahoo's RPS rate
in the United States is less than a percentage of Google's estimated RPS on a
12-month average. Microsoft will also pay $150 million to Yahoo over the first
three years of the agreement, and hire over 400 Yahoo employees.

Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.